Valuation:

Target price: 85,456 VND, presenting 36% upside compared to closing price at 62,700 VND at
31/12/2020.
We evaluate BMP based on two methods including Discounted Free Cash Flow to Firm and
Relative Valuation P/E. Due to the market fluctuation and underestimation of BMP, different
weight of 70 percent in DCF and 30 percent relative assessment was adopted. In order to
recognize the full potential for BMP in the plastics industry, higher weighing in DCF is more
dependable.
Discounted Free Cash Flow to Firm:
We apply the DCF three-stage growth model. The first stage is from 2021 to 2025, our revenue
forecast is based on the company’s strategy. The second stage is 10 years since 2026 when
growth in BMP is declining progressively to a terminal. After that, as the world GDP growth
rate, we expect the terminal growth rate to be 1.5 percent.
Discount rate:
We use CAMP to arrive at the risk Cost of Equity. Vietnamese equity risk premium is 9.57% and
the risk-free rate for 10-year government bonds is 2.451%. By running five-year regression from
01/01/2016 to 31/12/2020, Beta was calculated around 0.919 between MBP’s stock return and
VN-Index return. Also, the risk Cost of Equity and the risk Cost of Debt are estimated at about
11.25% and 0.09%, respectively. The tax for BMP company is 20% as tax on government-
regulated manufacturing companies in 2014. Finally, we had WACC at 11.14% for our valuation.
Revenue projection:
We forecast revenue based on each year's consumer capacity and the average sales price. The
revenue of BMP consists in the sale of finished plastic products, raw materials, and services. We
concentrated on forecasting the total volume of plastic used for the production of finished
goods and materials sold, as the service delivery constitutes the insignificant weight in a total
sale.
In 2021: BMP's plastic pipe products mainly serve the civil construction market, so the
consumption demand for this product depends on the growth of residential and non-residential
construction values. In the second quarter of 2021, due to the impact of the epidemic and the
negative impact of restrictions and distancing measures, delaying construction projects.
Furthermore, Oversupply in the region will continue due to consumer demand affected by the
epidemic in major consumer markets such as China and India.
BMP's revenues are quite reserved in the 2nd quarter as opposed to the 2021 plan by the
temporary fluctuations in real estate and construction due to the crisis. The increase of capacity
consumption in 2021, which is over 7000 tons compared to 2020, is forecasted to increase
about just 6 percent. The 6% growth rate is caused by increasing demand focused at the year-
end, same as previous years when construction demand tends to grow more at the final
quarter.
From 2022 to 2025, BMP's medium-term plan is to safeguard its market share from other
competitors and seeks to use its production capacity to improve the capacity of the Long An
branch by 7,000-11,000 tons annually. In the meantime, Vietnam will control the corona crisis,
with BMP expected to recover in sell growth by 2022. Due to distinct competitive benefits like
long-term brand equity, excellent product quality, and system There is a well-restructured
distribution system across the country. We anticipate that the BMP sales will increase
consumption capacity in a more stable growth period by an average of 7 percent per year. This
is corresponding to construction growth, and as a market leader, a 7% in consumption growth is
not too high but enough to fulfill the demand for plastic pipes.
The company began to reduce revenue from 2018 due to the harsh competitive environment,
but the following years have begun to soften. BMP is on the way to regaining market share,
actively investing in the public in the coming years, and long-term efficiency improvement
initiatives such as product quality improvement, automation, etc. Therefore, we believe that
BMP is improving.
Capital expenses and depreciation forecast.
The factory began operation in 2017 in the second phase, with a planned capacity of 20,000
tonnes/year. In 2020, they have invested 195 billion VND in production equipment. We expect
BMP to be able to produce four available factories between 2021 and 2025. Moreover, CAPEX
investments are made principally through investment in plastic manufacturing equipment that
uses new technology. We are therefore planning to increase CAPEX in accordance with the
previous latest years. Depreciation is in proportion to fixed-asset investment.
Loan projection:
In 2018 and 2019, BMP has almost no long-term debt and a very small amount of short-term
debt. Based on the company’ strategy, there will be no huge investment in the future. We expect BMP
to remain such a low weight of loan in its capital structure. Accumulated in 2020, Binh Minh Plastics'
liabilities is VND 546 billion, up 43% compared to the end of 2019, mainly short-term payables
to TPC ViNa Plastics and Chemicals Co., Ltd. We expect the debt structure to decrease in the
coming years.
Relative valuation:
We take an average P/E of several domestic companies in the same sector as BMP to make
relative assessments because it can account for the average P/E of the plastic industry in
Vietnam.
Relative value: Our BMP target price assessment is VND 59 208 based on this methodology.
Risk to Target Price:
We did not include dramatic declines in the plastics industry regard to the production of tubes
in our valuation assumptions. In addition, in the event any unexpected crisis has a negative
impact or changes occur in the selling structure of BMP on the plastic pipe market, our BUY
recommendation must be carefully reconsidered.
We believe the effect of Terminal growth and WACC on our target price assessment should be
demonstrated by sensitivity analysis at each 0.5-point adjustment. We find that the target BMP
price is still higher than the current one in the worst-case analysis.
VALUATION PRICE TARGET
Expected price Percentage
FCFF valuation model 96,704 70%
Relative valuation 59,208 30%
Expected price 85,456 100%
Current price 62,700
Upside 36%

RELATIVE VALUATION
Net income 522,585,572
Number of shares outstanding 81,860,938
Earning per share (EPS) 6,384
Average PE of the industry 9.27
Price 59,208

VARIABLE VALUE
D/E 1.08%
Debt Value 55,310,000
Equity Value 5,132,680,813
Debt Value + Equity Value 5,187,990,813
Debt/(Debt+Equity) 1.07%
Equity/(Debt+Equity) 98.93%
Cost of Debt 0.09%
Cost of Equity 11.25%
Beta 0.919910936
Risk-free Rate (VN 10y Bond) 2.45%
Market Risk Premium 9.57%
Tax rate 20%
WACC 11.14%

COMPANY PE
BMP 9.81
NTP 9.48
HSG 8.54
Average PE 9.27
 SALES
180,000 9%
160,000 8%
140,000 7%
120,000 6%
100,000 5%
80,000 4%
60,000 3%
40,000 2%
20,000 1%
0 0%
2021F 2022F 2023F 2024F 2025F

Consumption capacity (ton) % Growth rate